Posted on 09/08/2005 7:01:08 AM PDT by cogitator
SANTA MONICA, Calif., Sept. 7 /U.S. Newswire/ -- The Foundation for Taxpayer and Consumer Rights (FTCR) today exposed internal oil company memos that show how the industry intentionally reduced domestic refining capacity to drive up profits. The exposure comes in the wake of Hurricane Katrina as the oil industry blames environmental regulation for limiting number of U.S. refineries.
The three internal memos from Mobil, Chevron, and Texaco (available at http://www.consumerwatchdog.org/energy/fs/ show different ways the oil giants closed down refining capacity and drove independent refiners out of business. The confidential memos demonstrate a nationwide effort by American Petroleum Institute, the lobbying and research arm of the oil industry, to encourage the major refiners to close their refineries in the mid-1990s in order to raise the price at the pump.
"Large oil companies have for a decade artificially shorted the gasoline market to drive up prices," said FTCR president Jamie Court, who successfully fought to keep Shell Oil from needlessly closing its Bakersfield, California refinery this year. "Oil companies know they can make more money by making less gasoline. Katrina should be a wakeup call to America that the refiners profit widely when they keep the system running on empty."
"It's now obvious to most Americans that we have a refinery shortage," said petroleum consultant Tim Hamilton, who authored a recent report about oil company price gouging for FTCR. (Read the report at http://www.consumerwatchdog.org/energy/rp/ ) "To point to the environmental laws as the cause simply misses the fact that it was the major oil companies, not the environmental groups, that used the regulatory process to create artificial shortages and limit competition."
The memos from Mobil, Chevron and Texaco show the following.
-- An internal 1996 memorandum from Mobil demonstrates the oil company's successful strategies to keep smaller refiner Powerine from reopening its California refinery. The document makes it clear that much of the hardships created by California's regulations governing refineries came at the urging of the major oil companies and not the environmental organizations blamed by the industry. The other alternative plan discussed in the event Powerine did open the refinery was "....buying all their avails and marketing it ourselves" to insure the lower price fuel didn't get into the market. Read the Mobil memo at http://www.consumerwatchdog.org/energy/fs/5105.pdf
-- An internal Chevron memo states; "A senior energy analyst at the recent API convention warned that if the US petroleum industry doesn't reduce its refining capacity it will never see any substantial increase in refinery margins." It then discussed how major refiners were closing down their refineries. Read the Chevron memo at http://www.consumerwatchdog.org/energy/fs/5103.pdf
-- The Texaco memo disclosed how the industry believed in the mid-1990s that "the most critical factor facing the refining industry on the West Coast is the surplus of refining capacity, and the surplus gasoline production capacity. (The same situation exists for the entire U.S. refining industry.) Supply significantly exceeds demand year-round. This results in very poor refinery margins and very poor refinery financial results. Significant events need to occur to assist in reducing supplies and/or increasing the demand for gasoline. One example of a significant event would be the elimination of mandates for oxygenate addition to gasoline. Given a choice, oxygenate usage would go down, and gasoline supplies would go down accordingly. (Much effort is being exerted to see this happen in the Pacific Northwest.)" As a result of such pressure, Washington State eliminated the ethanol mandate - requiring greater quantities of refined supply to fill the gasoline volume occupied by ethanol. Read the Texaco memo at http://www.consumerwatchdog.org/energy/fs/5104.pdf
FTCR is nonprofit, nonpartisan consumer group. For more information visit, http://www.consumerwatchdog.org
Yep, the envirowhackos.
This is a difficult area. Free enterprise should allow businessmen to decide how much of a commodity they will produce. The businessman's decision will be based largely on his perception of supply and demand. If he can make more money by reducing his production, he will do so.
On the other hand, the recent price increases smack of collusion on the part of the major suppliers. Americans have not tolerated that practice in the past, especially concerning commodities or services which are widely viewed as necessary for the general welfare, and they certainly are not in the mood for it now.
Even if the refineries hadn't been shut down, we would still have to build new ones. Refineries have a limited lifespan and eventually need to be replaced. Even overhauling old ones isn't as effective as building a new one, and if you do overhaul the old one, you end up limiting the supply anyway.
I don't know, but oil is used for other things than making gasoline???
I've no doubt that refining capacity is the critical factor when it comes to the price of gasoline.
However, a barrel of oil only contains 55 gallons, doesn't it?
This past springtime that was selling for about $55, or 1 dollar a gallon. It's now about $65.
Maybe they can make more than 55 gallons of gasoline from 55 gallons of oil, but that doesn't make sense to me. Therefore, counting the $65 cost of a barrel of oil and the costs of transport, refining, additives, advertising, marketing, etc., I'd have to admit that any gasoline price under $1.70 or so a gallon ouldn't even cover costs.
Consider the source, please: FTCR = overtly left-wing California-based conumer "watchdog" group opposed to insurance companies, pharmaceutical companies, health-care providers, and well, private enterprise in general.
Fascinating. However, when I go to the web site and read the oil company internal memos I find that they don't support the allegation that big oil tried to reduce refining capacity either for themselves or others.
I just read the first three memos on their website, and I just don't see their point. The oil companies would like to see more profit from refinery operations. They are in a profit-making business, aren't they?
The mid 90's huh. Who was President then?
What?! You mean this is just more left-wing boob-bait?
Because our crude oil market only uses a small percentage of the world's supply, and only about 20% of that is used to make gasoline (another 10% shared by diesel and heating oil).
First of all, what law requires the oil companies to keep old refineries open? What law requires the oil companies to keep any refineries open? And what is "no good reason"? Who defines that? If I own an oil company, I'm in it for a profit.
Haven't you heard? Oil companies are supposed to lose money and give away their product for free.
Reason is that they lower overhead associated with additional plants and drive up prices due to low supply and produce a higher NET profit than if they had more refineries open.
Less work, more money!
Not surprising at all.
The Godfather of Global Oil, John D. Rockefeller, was quoted as saying, "Competition is a sin".
His descendants and their associates are just following through on his wishes.
Yes. But try not to let it shake your faith in the mainstream media. ;-)
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